Abstract
One of the serious limitations of the Modigliani–Miller theory is the suggestion about perpetuity of the companies. In 2008, Brusov–Filatova–Orekhova (Filatova et al. 2008) have lifted up this limitation and have shown that the accounting of the finite lifetime of the company leads to significant changes of all Modigliani–Miller results (Modigliani and Miller 1958, 1963, 1966): capitalization of the company is changed, as well as the equity cost, k e, and the weighted average cost of capital, WACC, in the presence of corporative taxes. Besides, a number of qualitatively new effects in corporate finance, obtained in Brusov–Filatova–Orekhova theory (Brusov and Filatova 2011; Brusov et al. 2011a, b, c, 2012a,b, 2013a,b, 2014a,b), are absent in Modigliani–Miller theory.
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References
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Brusov, P., Filatova, T., Orekhova, N., Eskindarov, M. (2015). Modern Theory of Capital Cost and Capital Structure: Brusov–Filatova–Orekhova Theory (BFO Theory). In: Modern Corporate Finance, Investments and Taxation. Springer, Cham. https://doi.org/10.1007/978-3-319-14732-1_3
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DOI: https://doi.org/10.1007/978-3-319-14732-1_3
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